Weekly Investment News -
Aurum Advisory Services
Weekly investment news from Aurum Wealth Management Group.
After every research shop on Wall Street put out estimates of whether a little bit of taper or a lot of taper would be announced at this week's Fed meeting, it was all for naught. Ben Bernanke & co. surprised everyone by announcing that the LSAP (Large Scale Asset Purchases) would continue as scheduled at $85 billion per month.
Large private equity firms are bringing new products to the masses.
In early August Barron's published "The Next Private-Equity Investors: Mom and Pop" and the Wall Street Journal covered the topic in May with Megafirms Talk about Challenges Catering to Retail Investors.
We believe that cash is an important asset class within portfolios. The proper cash allocation is driven by two main factors: (1) liquidity management and (2) opportunity risk management.
Aurum Weekly Access - 6/28/13
The goal of any personal investment program should be to maximize real (inflation-adjusted) returns on an after-tax basis, comparable to the necessary and requisite risk to achieve the objectives. Even though tax season is over (as our friends at Skoda Minotti are quite happy about), tax planning for investments is never over. One easy way to improve tax efficiency is with low turnover managers that generate long-term capital gains as opposed to short-term gains taxable at ordinary income rates. Another is using municipal bonds, assuming the asset class is fairly priced on an absolute basis and relative to other fixed income alternatives of similar risk. A third way to increase portfolio tax efficiency is asset location.
The end of Quantitative Easing (QE) is coming one day; the Fed put everyone on notice with four Fed officials discussing the 'taper' of open market security purchases.(i) Many people believe the money printing from the Fed went directly into the stock market and that these dollars are what is propelling the equity markets to new all-time highs. While they are somewhat right in form, they are wrong in substance. The Fed is not buying equities, but it is shrinking the supply of Treasuries and replacing them with cash. Repressing the interest rate curve is what the Fed is intentionally doing, and in so forcing the marginal investor higher than he or she would normally have to venture along the risk curve to earn satisfactory returns.
If you have not followed the exciting world of global macroeconomics over the last month, you missed a major controversy. The widely publicized authors Carmen Reinhart and Ken Rogoff (R&R), professors at Harvard University, came under scrutiny for work related to a paper and the conclusions on their book, This Time is Different. The key takeaway from the book and subsequent papers was that once a country reaches a public debt to GDP threshold of 90%, growth slows dramatically. This had enormous influence on policy makers all over the world given that the majority of developed countries, from the U.S., to Japan, to most countries of the Eurozone had debt to GDP ratios well above 90%. The policy is familiar to most in that the government sector must cut deficits for the private sector and the overall economy to prosper. None of this was the controversial... until now.
America’s pastime is finally back with buzz from anticipation of the season beginning turning to excitement. There was already nearly a ‘perfect game’ and our Cleveland Indians started with a hot two game winning streak (it doesn’t take much for we Cleveland fans). With 162 games on the calendar over the next six months though, the old baseball saying applies, “don’t let the highs get you too high, or the lows get you too low.”
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Aurum Named to Financial Advisor Magazine's All-Star Research Team
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- Less Taper Talk, Not Much Action
- Mom & Pop, "Welcome to the Club"
- The Role of Cash - Part 2
- The Role of Cash - Part 1
- Getting Real